Spread Betting Tips

Here we look at a range of spread betting tips to help you reduce your risks and hopefully increase your profits, although because this is spread betting there is no guarantee of that.

These spread betting tips, as with all pages on SpreadBets.org.uk, are subject to terms and conditions.

Please remember that all content on SpreadBets.org.uk is provided without warranty of any kind. Before acting on any information contained within this website seek independent financial advice.

Trading Tips

Share Tips – Have a look at what the professionals are suggesting. Every weekday we list a set of brokers’ recommendations to see which shares the professionals think are overpriced / underpriced.

Naturally with spread betting you can speculate on markets to rise but you can also spread bet on markets to fall, so the brokers’ downgrades can also make for interesting reading. For the latest recommendations, see share tips.

Stop the Chat – be wary of internet chat rooms and forums. Most good forums have rules and moderators to help stop ‘dodgy tips’ but there are still plenty of users trying to influence the markets for their own advantage.

If someone suggests a spread betting tip on a certain market and you like the idea then fully research the idea/market before you trade.

Planning

Planning / Strategy – Put a plan together before you trade, at the minimum, you should:

Consider the markets you are going trade and why you are going to trade them.

Consider how much you are prepared to risk and, naturally, the profit level you are aiming for.

Plan your Limit Order levels to help lock in profits (and help you reduce the risk of you getting too greedy).

Closing too Early – Try not to exit a position too early. It is often tempting to close your trade as soon as it has made a small profit. The market could keep moving in the same direction.

As Joshua Raymond, Market Strategist at City Index, says, “Try not to be hasty, let your profits run. It’s important to stick to your trading strategy and close a position at your predetermined point. This can be done automatically using Limit orders. Nevertheless, be careful, a spread bet / market will not go your way forever.”

Closing too Late – Try not to exit a position too late. With spread betting is easy to be greedy. Remember that the markets can go down as well as up. If you hold onto a profitable position for too long, you may see your trade get become a good deal worse. Again, close the trade when your plan tells you to. Don’t just stay in the market for ‘a little bit longer’.

A New Way – Never be afraid to explore a new path. As Joshua Raymond of City Index says, “Although consistency is important, do not be afraid of re-evaluating your spread betting strategy if it’s not working for you. If your financial situation or your goals changes, you should re-evaluate your plan.” If you’re not 100% sure about a new plan, you could always try testing your theories on a demo account.

Spread Betting Tips – Practice

Practice – Put your spread betting plan to work in real market conditions with a demo account. Many firms like FinancialSpreads.com will offer free demo accounts. A Demo Account lets you trade the markets with virtual funds. In other words, it is risk free. If you are less familiar with spread betting, or perhaps you want to test your theories on specific markets, then a little practice should help you understand the risks and rewards.

Risk Management

Risk Management – Learn how to use risk management tools. Guaranteed Stop Loss orders / Stop Loss order and Limit order can help get you out of your chosen market at specified prices.

Stop Losses – Use a Stop Loss or a Guaranteed Stop Loss. These are simple trading options that you can add to your order to help you limit your downside. You can add a Stop Loss to your spread bet when you make the initial trade or even at a later date.

Note that Stop Losses are not guaranteed and that the markets can ‘gap’, ie jump between price levels. The markets do not always move smoothly and therefore if the market gaps or jumps over your Stop Loss level then your trade will be closed at the next traded price.

Guaranteed Stop Losses – a Guaranteed Stop Loss works just like a Stop Loss but it is Guaranteed. Even if a market gaps, your trade will be closed at the level that you specified. Note that where firms offer Stop Losses and Guaranteed Stop Losses, if you want to add the latter to your trade then the spread is often a little wider.

Limit Orders – Use a Limit Order. These are simple trading options that you can add to your order to help you set your profit levels. You can add a Limit order to your spread bet when you make the initial trade or at a later date.

Stop Loss Positioning – Try not to set your Guaranteed Stop Loss / Stop Loss to close to your trade. As City Index says, “Picture the scene: You log in to your spreads account and place a bet on the FTSE 100. Just a few minutes later the position closes out, leaving you with a loss. What happened? The chances are that you placed your Stop Loss too close to your opening position.

“Be aware that markets, particularly the volatile ones, need a bit of breathing room so that they can fluctuate before they start performing. Setting a wider Stop can be good but again, make sure that you are only trading with capital that you can afford to lose.”

Appreciate Your Limits – Appreciate exactly how much you are willing to risk on each spread bet. Never risk more than you can afford to lose. Make sure you maintain enough capital so that you can reach your goals. As City Index says, “Spread betting is a geared trading product, however that doesn’t mean you should be speculating with the maximum amount of funds that you have in your account.”

Risks – You should also understand that financial spread betting carries a high level of risk. You can lose more than your initial investment or stake. Financial spread betting may not be suitable for all investors. Only trade with money that you can afford to lose. Make sure you fully understand the risk involved. If necessary, seek independent financial advice.

Spread Betting Tips on Emotions

Greed Isn’t Good – Don’t be greedy or overtrade. Ensure that you are only risking funds that you can afford to lose. Trading small stake sizes is a simple way of reducing your potential losses.

Greed Still Isn’t Good – One problem that many investors experience is their desire to make large profits very quickly. They often try to achieve this by opening too many trades. Whilst this may be tempting, it is often difficult to judge your overall position on a good number of trades, especially if the stake sizes are quite large.

Deal with your Emotions – acknowledge that you won’t win on every trade. Also accept that after you lose a spread bet you might be tempted to ‘chase your losses’, ie you might be tempted to place some quick, poorly researched trades so that you can recoup your capital. These new trades are more likely to lead to a further loss of capital.

Trading Tips

Spread Bet on the Markets that you Know – Try to trade the companies and markets that you understand. If you are unsure about the crude oil markets but have a good understanding of the UK retail sector then you are better off trading UK retail shares.

Always Be Prepared – Check the market conditions before you place any spread bets. Some spread bettors prefer fundamental analysis and others prefer technical analysis. Irrespective of your style, it’s important to know how to use technical and fundamental tools so that you can quickly check the state of the markets before you trade.

As Martin Slaney, Head of Derivatives at GFT, said, “As a trader, you need to be prepared. The key is to not simply expect the unexpected, for example sudden news announcements, changes in geopolitical developments or market sentiment, but to also employ a sound risk management system that provides you with extra peace of mind.”

Steady – Remember that slow and steady wins the race, at least according to GFT who say, “The key to successful trading is being consistent. All good traders will lose money however as long as they maintain a positive edge, they can still come out as the winner.”

Spread betting carries a high level of risk. You can lose more than your initial investment or stake. Spread betting may not be suitable for all investors. Only trade with money that you can afford to lose. Make sure you fully understand the risk involved. If necessary, seek independent financial advice.

Spread betting carries a high level of risk. You can lose more than your initial investment or stake. Spread betting may not be suitable for all investors. Only trade with money that you can afford to lose. Make sure you fully understand the risk involved. If necessary, seek independent financial advice.

SpreadBets.org.uk does not endorse the information and analysis available on this site. It is a personal view of the writer and purely for information purposes. Under no circumstances is the information hereon to be used or considered as, an offer to sell, or a solicitation of any offer to buy. The website content does not constitute investment advice and neither the individual writer(s) nor SpreadBets.org.uk accepts any responsibility for any use of the content.

* Spread betting is tax free in the UK. This tax free status is subject to change and can differ if you pay tax outside the UK.